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Re: Personal: How much did you save before pursuing your MBA? [#permalink]

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22 Aug 2008, 10:58

terp06 wrote:

Audio wrote:

Wow, how did people manage to save that amount of money?? I was proud of my 12k, but it seems pretty crap in comparison with others! And I'm 30, so definitively not young.

I'm looking at 160k debt, not a nice perspective.

160k is nothing if you're at Wharton.

I'm from continental Europe, being heavily in debt - and especially for studies - is a concept I'm completely unfamiliar with!

More seriously, yes I know that normally my package should be big enough to pay my debt back relatively quickly, however that implicates that I must... find a job! And yes the stats are good, but it's been rough years, and it's not over yet (more on that in another post on the main forum)
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Re: Personal: How much did you save before pursuing your MBA? [#permalink]

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22 Aug 2008, 12:27

I had dinner with some folks from Germany last night. They mentioned that they only pay ~$750 USD per semester to attend a German undergraduate program. Pretty impressive - but obviously that's a result of the tax structure. They were baffled when I mentioned how much US universities cost and the debt loads of US students. However, they were equally shocked by how much we earn and our low tax rates.
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Re: Personal: How much did you save before pursuing your MBA? [#permalink]

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22 Aug 2008, 12:34

terp06 wrote:

I had dinner with some folks from Germany last night. They mentioned that they only pay ~$750 USD per semester to attend a German undergraduate program. Pretty impressive - but obviously that's a result of the tax structure. They were baffled when I mentioned how much US universities cost and the debt loads of US students. However, they were equally shocked by how much we earn and our low tax rates.

For all our warts and problems....I LOVE AMERICA!
_________________

------------------------------------J Allen Morris**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a$$.

Re: Personal: How much did you save before pursuing your MBA? [#permalink]

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22 Aug 2008, 13:35

Paradosso wrote:

I have an UG degree by the best ranked Italian university (private) and I was paying about 6K€ per year. Public schools' (some of which are very good) tuitions are very similar to German ones.

You would not believe how much this is detrimental to the quality of the education you receive: class is full with people that just want to defer working for a couple of years and will eventually drop out, or people that will graduate in 7-8 years. The average class size is 500 and benefiting from classes may be really hard. Plus, universities rely on public funding which is obviously not sufficient and most of all not properly allocated (hardly any scholarship, for one). Matriculation is with a few exceptions open with no admission process/selection whatsoever.

Everybody then subsidizes the education of the unmotivated 18-year-olds by paying say 20% sales tax throughout the country or by receiving salaries that are substantially lower than those of our US counterparts (I work at Bain and my salary is 35% lower of my Moscow colleague and 40% lower of my US counterpart, and that's factoring in the ridiculous current exchange rate).

People from Continental Europe (especially Italy and France) have the least free cash flow (salary after expenses) of the Western world, and unsurprisingly the least social mobility too: I would prefer to (have the possibility to) pay hundreds of thousand dollars to have a say in my future (or not paying them at all).

Re: Personal: How much did you save before pursuing your MBA? [#permalink]

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22 Aug 2008, 19:13

That's a very interesting international perspective. Kudos for sharing...both of you. I am about on the opposite spectrum of you two. I went to a small liberal arts private school in Oklahoma. It's a very good school. Ranked #7 in the West for Baccalaureate universities by US News & World Report. I think the largest class size I EVER had was 35 or 40. In my upper level history classes I had a quite a few that had between 4 and 10 students and even had 2 classes that had 4 or less students. Those classes were awesome. Taught by a professor with a Ph.D. from LSU (the guy loved civil war - best class I ever took. He played old war songs on his banjo for us). My business classes were taught by a Harvard MBA. Now, I have significant debt (significant compared to European school debt) from this education, but it was a great education and I don't regret it at all!
_________________

------------------------------------J Allen Morris**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a$$.

Re: Personal: How much did you save before pursuing your MBA? [#permalink]

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23 Aug 2008, 02:53

Audio,

yes, I went to Bocconi. Some random thoughts:

1) Forcing the retaking of 1st year is quite costly for a selection system for all parties involved --students who fail and lose a year instead of a few tens of hours of work and $250, students who pass but had to share resources with students who fail, and most of all the school. In US graduate schools of business, we pay for adcoms' time to assess us, resulting in better thought applications and obviously more success stories (very few people drop out of an MBA).

2) It's true that having to pay back your loan will affect your cash flows, but my point is that it was your choice to attend school and get a great education (jailen says it perfectly). And the fact that you were going deep in debt for it helped you make the most of it. Isn't it much better that getting a not-so-great education (because the system does not allow for a truly great one) which you are not motivated to give your best to (because you, or rather I should say your parents, are directly paying the lesser part of its cost), and then slowly repaying it through Belgium or Italy's absurd tax brackets? And you would pay those taxes regardless of whether you got an university education or not (taxes end up being a money transfer from poor people to rich people in Continentale Europe)!

2-bis) Note that, in Continental Europe, if you do well in your career, you end up paying in additional taxes much more than it would have cost you to take a loan: 20% sales tax, 50% tax bracket, and the most heavily taxed money is the bonus as you said, resulting in firms being disincentived to give money based on performance (I assume you got a pretty high bonus in London as a banker, I can tell you that, with a very good performance as a 1st year analyst in Bain Italy, I get a <10K€ bonus, and more than half of it is taken away by the taxman!)

3) Good point about real estate: if you hold certain positions in Italy, you certainly live in Milan or Rome, which further reduce your free cash flow (for, being it like I said, the bargaining power is all in the hands of Milan landlords, laundries, restaurants, whatever: I just spent two weeks in New York and I can say that you can live in Manhattan with much less than in Milan: there is simply much more choice --and I'm talking only of the cost side, but one should factor in also the additional "happiness" that being able to choose gives you, you can have things in NY which no sum of money can get you in Milan)

4) Very quick KPIs in the end: average savings of the people in this thread is about 50k, yours and mine are <20k and we will eventually get heavier loans to chase our dreams, we will have to pay higher rates as internationals and go through every possible hassle to work in the US (as you said, salaries would not allow us to get back to our home countries if we wanted to). Also: a good share of the people here are as old as you and I and are married and possibly with kids, which is almost unthinkable for Europeans. Spouses are helping will help (economically and not) during the MBA, while we will only be able to marry our girlfriends after the MBA (if they don't leave us as we are crossing the Atlantic --they can't work in the US). My girlfriend (not even 25, not married, no kids, no debt) has a law degree and now is thinking about getting an MBA: everyone looks at her like she was crazy --compare that with jailenmorris situation. As for how people think of you and me, leaving "high-paying" (for European standards) jobs and going in debt (in debt for education, what a scandal!) for some strange kind of US education, no need to remind you, uh?

When I was in Chicago, I discussed this over dinner with the excellent rhyme. Obviously he who has lived in Europe and is now in the US tends to see the better side of Europe and the poorer of America, yet I think very few Americans would find the European "social pact" tolerable.

The truth is that, as continental Europeans, we are from our cradle on discouraged to bet on ourselves. The cost of living the life we want to is leaving it all behind, which I am going to do but how many, who could, are not?

p.s.:This was written in a hurry and with some degree of emotional attachment, sorry for any poor English construction or suboptimal way of conveying my ideas, guys.

Audio wrote:

Hmmm. I agree and don't agree in the same time.

First of all, there are substantial differences between the countries, in taxes and education. I also paid a very small amount for my education: 750 euros per year for my undergrad, in a school that was ranked 13th in Europe (not extraordinary, but definitively quality education). I also experienced overcramped classes (some lectures had 300 students), and in my school there was no admission process either. However, there are also big differences.

Italian university system is (unfortunately for the Italian taxpayer) very lax: you can stay in uni for 8, 10, heck even 12 years if you want to, which is pretty ridiculous. Germany tends to have the same system. In my school however, more than 60% of the students failed their first year and had to start the whole year again (with some waivers for the courses where they scored heavily) - that was the selection system. If you failed twice in less than 3 years (for example, failing the same year twice), you need special authorisation to continue to study.

As for taxes, it's the same thing: some countries are much more taxed than others. However, it's all about what you get in exchange. For example, the UK is a fiscal paradise for me with their 35% tax (on average). But if you want to go to uni, you'll end up with a massive loan to pay back, something that's unthinkable in Belgium or France, and that is definitively going to impact your salary after monthly loan payments. And I'm not even going to go into the healthcare issue. So I guess it's all about what service you receive for the taxes you pay and that's very debatable (I personally don't think we get enough value for the taxes we pay, especially in Italy; I also think that taxes are sometimes poorly allocated, but those are other debates)

The downside of this type of system is that putting money aside is harder, especially if you live in cities where real estate is very expensive (read Paris or Milan). My bonus for example was taxed more than 60% (for every 100 euros I was getting in bonus, the taxman collected 61 euros). That makes expensive studies like MBAs less accessible (I'll end up with a 160k loan for my studies, which for any continental European is an absurdity).

I also agree with you when you say that it makes us Europeans much less mobile: if you want to have a high quality education by doing an MBA, there is no way a European can go back to his home country (except the UK), simply because the salaries would not allow him to pay his loan back.

Re: Personal: How much did you save before pursuing your MBA? [#permalink]

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25 Aug 2008, 12:36

I wrote an answser for an hour, and I lost it for login reasons!!!!!! Grrrrrrrrr... Will try and reproduce my post tonight. Really REALLY pissed off.

Paradosso wrote:

Audio,

yes, I went to Bocconi. Some random thoughts:

1) Forcing the retaking of 1st year is quite costly for a selection system for all parties involved --students who fail and lose a year instead of a few tens of hours of work and $250, students who pass but had to share resources with students who fail, and most of all the school. In US graduate schools of business, we pay for adcoms' time to assess us, resulting in better thought applications and obviously more success stories (very few people drop out of an MBA).

2) It's true that having to pay back your loan will affect your cash flows, but my point is that it was your choice to attend school and get a great education (jailen says it perfectly). And the fact that you were going deep in debt for it helped you make the most of it. Isn't it much better that getting a not-so-great education (because the system does not allow for a truly great one) which you are not motivated to give your best to (because you, or rather I should say your parents, are directly paying the lesser part of its cost), and then slowly repaying it through Belgium or Italy's absurd tax brackets? And you would pay those taxes regardless of whether you got an university education or not (taxes end up being a money transfer from poor people to rich people in Continentale Europe)!

2-bis) Note that, in Continental Europe, if you do well in your career, you end up paying in additional taxes much more than it would have cost you to take a loan: 20% sales tax, 50% tax bracket, and the most heavily taxed money is the bonus as you said, resulting in firms being disincentived to give money based on performance (I assume you got a pretty high bonus in London as a banker, I can tell you that, with a very good performance as a 1st year analyst in Bain Italy, I get a <10K€ bonus, and more than half of it is taken away by the taxman!)

3) Good point about real estate: if you hold certain positions in Italy, you certainly live in Milan or Rome, which further reduce your free cash flow (for, being it like I said, the bargaining power is all in the hands of Milan landlords, laundries, restaurants, whatever: I just spent two weeks in New York and I can say that you can live in Manhattan with much less than in Milan: there is simply much more choice --and I'm talking only of the cost side, but one should factor in also the additional "happiness" that being able to choose gives you, you can have things in NY which no sum of money can get you in Milan)

4) Very quick KPIs in the end: average savings of the people in this thread is about 50k, yours and mine are <20k and we will eventually get heavier loans to chase our dreams, we will have to pay higher rates as internationals and go through every possible hassle to work in the US (as you said, salaries would not allow us to get back to our home countries if we wanted to). Also: a good share of the people here are as old as you and I and are married and possibly with kids, which is almost unthinkable for Europeans. Spouses are helping will help (economically and not) during the MBA, while we will only be able to marry our girlfriends after the MBA (if they don't leave us as we are crossing the Atlantic --they can't work in the US). My girlfriend (not even 25, not married, no kids, no debt) has a law degree and now is thinking about getting an MBA: everyone looks at her like she was crazy --compare that with jailenmorris situation. As for how people think of you and me, leaving "high-paying" (for European standards) jobs and going in debt (in debt for education, what a scandal!) for some strange kind of US education, no need to remind you, uh?

When I was in Chicago, I discussed this over dinner with the excellent rhyme. Obviously he who has lived in Europe and is now in the US tends to see the better side of Europe and the poorer of America, yet I think very few Americans would find the European "social pact" tolerable.

The truth is that, as continental Europeans, we are from our cradle on discouraged to bet on ourselves. The cost of living the life we want to is leaving it all behind, which I am going to do but how many, who could, are not?

p.s.:This was written in a hurry and with some degree of emotional attachment, sorry for any poor English construction or suboptimal way of conveying my ideas, guys.

_________________

Wharton admits, join the rugby team!! It'll be by far the best experience of your MBA life

My reason for taking out loans is that it would be too much of a hassle to sell off investments and have to rebalance my existing investments.

I think of it this way. I'll probably pay 8% or so for loans, but my investments should get me 5-8% over the long run. So best case scenario, it costs me nothing to borrow the money (versus using my own), worse case, it costs me a few percentage points of interest (which won't add up to much if I pay it off quickly).

In hindsight, it would have been much better to sell off the investments, since only 2 months later, the markets would lose about 50% of value.... but you could not really see that coming.

Have you had $50K saved at that time, you would have ended up with $25 with a slow recovery...

Having said that, I have had a variety of classmates, many of which were poor and many of which were rich and very rich. The money did not seem to provide a big divide, however, among the students, which I found very encouraging. I could not tell by sitting in the class who was loaded and who was not (not until I walked out to the parking lot that is).

This is completely off topic, but one funny story was meeting a guy in the gym who was a part time student. There was a group of us (full-timers) and we all started talking about cars (Porche, Lamborghini, Ferrari, etc), and he very humbly mentioned he had a chance to drive a few and really did not enjoy most of them. Of those, he said he liked Ferrari (I can't remember the model) the most and he liked it so much that he bought one. We of course thought he was BS'ing and showing off since when would a 28-year old waste so much money on a car, so we dismissed it and move on to another topic. The part-timer was a nice guy to talk to. We all had a good time chatting and working out and when it was time to say good byes, we already forgot about his silly comment. But when we left the gym, sure enough, there was a bright red Ferrari parked out front. I learned a lesson that day.
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Re: Personal: How much did you save before pursuing your MBA? [#permalink]

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28 Jul 2013, 14:56

Thanks for bumping this one up - its a good thread.

I have over 100k saved towards my hopeful matriculation next fall. I hope to get this number closer to 150k by the time I start my funemployment and eventual MBA studies.

I know that may seem like a lot - but I was fortunate to graduate undergrad with 0 debt. I managed to save a lot for the first 2-3 years of working as I was on the road 5/days a week, and "home" was my parents place. That said, I live a very frugal lifestyle. I'm not married, and I don't have kids. My car is paid off, but its nothing fancy. I don't take expensive vacations, and I don't eat out for dinner.

Riverripper is right (as he usually is/was) - I plan on taking out loans to cover my education, even with the money I have saved. If I get tuition reimubrsement from my eventual job, great. If not, I'll have a nice savings account to pay down my loans. Not to mention the interest I'll have for the 2 years I have that money invested *crosses fingers*
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I would save as much as you can. But that advice applies to every stage of life. Especially with the goals you've stated, you'll need a lot of savings. Specifically for business school you should also be looking at saving in an investment vehicle such as a 529 plan. That way your savings can go farther.
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